IRS Notice 2026-20 extends for an additional year, through December 31, 2026, the temporary relief for digital asset lot identification initially provided by IRS Notice 2025-7. During this relief period, eligible taxpayers may bypass the requirement to communicate specific lot selections to their custodial broker.
Under IRS regulations, when a taxpayer fails to make an adequate identification of units sold through a broker, the default rule is that the first-in-first-out method (FIFO) of identification must be used. (Treas. Regs. §1.1012-1(j)(3)(i))
The IRS recognizes that many digital asset brokers do not have systems in place to track a taxpayer’s specific identification of assets sold. For digital assets sold during the 2026 calendar year, taxpayers can make an adequate identification by:
- Identifying in the taxpayer’s own books and records by reference to any identifier, such as the purchase date and time or the purchase price for the unit sold, that is sufficient to identify the basis and holding period of the digital assets sold; or
- Recording a standing order on the taxpayer’s own books and records (e.g., an e-mail to their broker), provided that the recorded standing order includes sufficient information to identify any digital asset units sold.
To qualify for relief, the taxpayer must make the identification using either of the methods outlined above prior to the time of sale, disposition, or transfer.
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